Mid-America Apartment's (MAA) Q4 FFO & Revenues Top Estimates

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported fourth-quarter 2019 funds from operations (FFO) of $1.68 per share, surpassing the Zacks Consensus Estimate of $1.63. Further, the reported tally comes in higher than the prior-year quarter’s $1.55.

This residential REIT’s quarterly results reflect growth in same-store net operating income (NOI) and rise in average effective rent per unit for the same-store portfolio.

Rental and other property revenues came in at $416.8 million in the quarter, marginally outpacing the Zacks Consensus Estimate of $416 million. The reported figure also comes in higher than the year-ago quarter’s $398.1 million.

For full-year 2019, the FFO per share came in at $6.55, ahead of the Zacks Consensus Estimate of $6.50 and the prior-year tally of $6.04. This was supported by 4.4% year-over-year growth in rental and other property revenues to $1.6 billion.

Quarter in Detail

The same-store portfolio revenues grew 4.1%, backed by rise in average effective rent per unit of 4.3%, year over year. During the fourth quarter, the company’s same-store NOI increased 5% year over year. Moreover, average physical occupancy for the same-store portfolio was 95.7%, contracting 40 basis points (bps) year over year.

During fourth-quarter 2019, rent growth in the company’s same-store portfolio for both new and renewing leases, compared with the prior lease, increased 2.6% on a combined basis. This indicates a 100-basis-point improvement year over year.

As of Dec 31, 2019, unencumbered NOI was 90.2% of total NOI, lower than the 92.6% reported as of Dec 31, 2018.

As of Dec 31, 2019, MAA held cash and cash equivalents of nearly $20.4 million, down from approximately $34.3 million as of Dec 31, 2018. Additionally, as of the same date, total debt outstanding was $4.5 billion.

Furthermore, as of the same date, $947.7 million of combined cash and capacity were available under its unsecured revolving credit facility, net of commercial paper borrowings.

Portfolio Activity

During the December-end quarter, the company acquired The Greene, a new 271-unit multi-family apartment community in Greenville, SC.

In October, it exited the Little Rock, AK market with the sale of its five multi-family properties. Gross proceeds from the sale were $149.6 million.

During the quarter ended Dec 31, 2019, MAA completed the renovation of 1,733 units under its redevelopment program. With this, the company renovated 8,329 units during the year ended Dec 31, 2019.

At the end of the fourth quarter, MAA had seven development community projects under construction, with total projected costs of $489.5 million. Notably, an estimated $345.6 million remained to be funded as of Dec 31, 2019.

Outlook

For first-quarter 2020, MAA expects Core FFO per share of $1.53-$1.65. Currently, the Zacks Consensus Estimate for the same is pegged at $1.60.

MAA has guided 2020 Core FFO per share of $6.38-$6.62. Currently, the Zacks Consensus Estimate for the same is $6.56.

The company’s full-year outlook is based on same-store portfolio revenue growth of 3.25-4.25%, same-store portfolio operating expense rise of 3.75-4.75% and same-store NOI increase of 3-4%.

Our Viewpoint

MAA’s stellar results are encouraging. Notably, robust demand for apartment housing enabled the company to witness decent growth in its same-store portfolio. This also supported low resident turnover as indicated by the 47.1% of resident move outs for the same-store portfolio for the October-December period on a rolling 12-month basis.

Furthermore, its ongoing redevelopment program enabled the company to achieve average rental rate growth of 9.8% above non-renovated units. Such renovation and interior upgrade efforts will drive top-line growth in the upcoming days.

Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise

Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise

Mid-America Apartment Communities, Inc. price-consensus-eps-surprise-chart | Mid-America Apartment Communities, Inc. Quote

MAA currently carries a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like AvalonBay Communities, Inc. AVB, Host Hotels & Resorts, Inc. HST and Healthpeak Properties, Inc. PEAK. While AvalonBay Communities is slated to report quarterly numbers on Feb 5, Host Hotels and Healthpeak Properties will release Q4 results on Feb 19 and Feb 11, respectively.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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